The downturn may have focused minds on efficiency, but the post-crisis economy is now a very different environment, according to Tony Pringle, managing director, UK and Ireland, at company information and business intelligence provider Bureau van Dijk.
“Businesses have invested very heavily in systems to help them manage their prospects and clients,” says Mr Pringle. “But there hasn’t been the same focus from a procurement and supplier management point of view, despite the fact that the amount of money moving around in those areas is often not far off what the company itself turns over.”
Monitoring the financial performance of specific suppliers will be particularly essential if organisations are to meet increased demand without disruption to their supply chain. Yet it can be difficult to identify exactly how a supplier business – and any wider group ownership – is performing or indeed the extent to which that organisation is reliant on your business for its survival.
“Understanding who you’re working with, including ultimately who owns that company, is important for numerous reasons,” says Mr Pringle. “Quite often companies will be unaware they’re dealing with the same group through a number of subsidiaries. All of a sudden they can realise economies of scale and look for opportunities to move other existing spend into that group.”
From a risk perspective, keeping a close eye on financial performance and ownership structure can also help companies identify any changes to supplier circumstances which, if not identified early, could lead to supply chain disruption or an inability to take on additional orders from customers.
“You need to know that the company is stable and will continue to be stable,” says Mr Pringle. “If a supplier is part of a bigger group, does that group have a significant business in it which is at risk?”
Having a closer understanding of who is supplying an organisation can also help protect against reputational damage and even prosecution under anti-bribery legislation – something that is increasingly of concern at board level.
“If the beneficial owners of the businesses are individuals, you need to know who they are. You don’t want to find yourself all over the press because you’re being supplied by someone who was on a sanctions list. These days there are very few excuses for not being aware of exactly who you’re dealing with,” he says.
To cope with such issues, procurement and supply chain managers need information of the financial health and ownership structure of their key suppliers, including the ability to tailor this to their own requirements, by supplier, spend, segment and category.
This is the premise behind Procurement Catalyst, a dynamic new supplier risk platform created by Bureau van Dijk, which combines an organisation’s own supplier data with extensive risk intelligence from external sources, allowing businesses to monitor the current statuses of organisations relevant to them and set alerts to inform them of any changes which may need to be investigated.
“Companies often struggle to get that bird’s eye view of their supply chain which will allow them to quickly and easily identify where the problems are,” says Mr Pringle. “Although some will say they’re doing this, the reality is that very few are. It’s a very effective way of guarding against complacency and ensuring businesses are able to face an economic upturn with confidence.”
For more information: www.bvdinfo.com/procurement or call 020 7549 5000